European Central Bank member Knot says a 50 basis point hike in July is not off the table

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Christine Lagarde (R), President of the European Central Bank (ECB), and Vicepresident Luis de Guindos (L)

Thomas Lohnes | Getty Images News | Getty Images

European Central Bank member Klaas Knot has refused to rule out a 50 basis point hike for the Frankfurt institution at its upcoming July meeting.

The ECB is assessing its next monetary policy move as it looks to rein in inflation running at record highs, with two more consumer price index readings due before policymakers meet.

Having confirmed the end of its bond-buying program in the third quarter of this year, markets increasingly expect the ECB to begin hiking interest rates over the summer. The U.S. Federal Reserve and the Bank of England have both imposed multiple rate rises so far this year.

ECB President Christine Lagarde said on Monday that the bank is likely to lift its deposit rate, which currently sits at -0.5%, out of negative territory by the end of September.

Speaking to CNBC at the World Economic Forum in Davos, Switzerland, the Dutch central bank president said he will be looking out for underlying dynamics in inflation which have the potential to influence inflation expectations.

“We can only afford gradualism if inflation expectations remain well-anchored. If you now look at the various measures of inflation expectations in the euro area, they are now what I would say at the upper limit of still being well-anchored,” Knot said.

He added that policymakers need to retain “full optionality” in order to adapt to new data that might challenge its current outlook.

German producer prices soared by 33.5% annually in April, prompting further de-anchoring concerns.

This is a breaking news story, please check back later for more.

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